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Tips for tidying your financial documents

Tips for tidying your financial documents

If you’re one of the many viewers hooked on the Netflix series Tidying Up with Marie Kondo, you’ll know that going through all your paper clutter and financial documents is one of the lessons on the road to a tidy life.

Regardless of whether you’re a Marie Kondo fan or not, it’s a good idea to do an annual “financial spring cleaning” and declutter your filing cabinet, your desk drawers and the various hiding places where miscellaneous scraps of paper tend to accumulate and multiply.

But when it comes to financial documents, how long do you need to hang onto them?

It’s a common question and fortunately we have some guidelines to help you tidy up your financial documents. Read on to find out what you should be saving, and what’s okay to shred.

See how Jen does in an exciting game of Keep or Toss – will she win the mystery prize??? Watch the video below to find out.

Keep forever

If you’re long overdue for some organization in the paperwork department, start here! This category includes all the super-important life stuff that’s usually issued to you only once (and therefore is a total pain to replace):

Birth and death certificates

Social Insurance cards and ID cards (even expired versions)

Passports (even expired versions)

Marriage licences and divorce decrees

Copies of wills, trusts, and powers of attorney

Adoption papers

Records of paid mortgages

Safe-deposit box inventory

Your “keep forever” documents should be kept in a secure place. A locking file cabinet in your home is a popular choice, but consider upgrading to a safer alternative, such as a fireproof safe in your home or a safe-deposit box at your credit union or bank. Also consider scanning these documents and having them backed up on the cloud (and password protected, of course), so that you can access them remotely and quickly in an emergency.

Keep for 6 years

This category includes all supporting documents for your income tax return, plus a couple of other odds and ends. This may seem like a long period of time, but it’s not an arbitrary number – 6 years after filing a return is how far back the Canada Revenue Agency (CRA) can go to audit a tax return.

An audit is an evaluation of your tax return to verify its accuracy and to ensure compliance with tax laws. Many people associate being audited with having committed tax fraud or some other shady financial behaviour but, in fact, a number of taxpayers are audited on a random basis each year.

If audited, you are required by law to provide the documentation that supports the claims made in your tax return. In some cases, additional information may be required in order to verify a claim you’ve made – it might just be a matter of providing a cancelled cheque, a receipt or a bank statement. In other instances, the audit may take place on-site (meaning at your residence or workplace) or at a CRA office. Being well-organized is the best way to make the process as quick and painless as possible.

So, what sorts of documents should you hold onto for 6 years?

Income tax returns

Any forms that support income or a deduction on your tax return (e.g., receipts, cancelled cheques, T4 slips)

Records of selling a house or stock (documentation for capital gains tax)

Keep for 1 year

This category mostly consists of monthly statements. A good rule of thumb is to keep your monthly statements for the current year, and then shred them once you’ve reconciled them with an annual statement. The exception is any statement needed for tax purposes – those get grouped into the “keep for 6 years” category.

Bank statements

Pay stubs

Quarterly investment statements

Cancelled cheques

Keep for 45 days

Credit card statements

Shred credit card statements after 45 days, but hang onto those statements that you may need for business, for taxes, as proof of purchase, or for insurance.

Keep for 30 days or less

ATM slips

Utility and phone bills

ATM slips can be tossed once you’ve checked them against your monthly bank statement. Utility bills and phone bills can be shredded after you’ve paid them, unless they contain tax-deductible expenses.

Keep as long as active

This bonus category is a catch-all for agreements and contracts that are active for varied amounts of time:

Warranty information

Insurance documents

Vehicle titles and loan documents

House and mortgage documents

Pension records/retirement plans

You’ll want to hang onto the records in this category for at least as long as you own the asset. For major purchases, stapling the original purchase receipt to the user manual or warranty information will keep everything in the same spot, should you need to make a warranty claim. Documents relating to improvements and upgrades on your home or vehicle should also be saved alongside your title and loan papers.

Sorting through financial documents is a pretty straightforward process once you figure out how long you need to hang onto specific types of documents. Doing a periodic cleanup will save you time and hassle in the long run, and will keep your desk drawers and filing cabinets clutter-free in the meantime!